Fair Value Measurements

3 Months Ended

Mar. 31, 2018

The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:



As of March 31, 2018 (In millions)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	3,773.7	$	—	$	3,773.7	$	—
Marketable debt securities:
Corporate debt securities	1,557.9		—		1,557.9		—
Government securities	1,143.2		—		1,143.2		—
Mortgage and other asset backed securities	307.1		—		307.1		—
Marketable equity securities	22.8		22.8		—		—
Derivative contracts	3.2		—		3.2		—
Plan assets for deferred compensation	28.3		—		28.3		—
Total	$	6,836.2	$	22.8	$	6,813.4	$	—
Liabilities:
Derivative contracts	$	147.7	$	—	$	147.7	$	—
Contingent consideration obligations	498.0		—		—		498.0
Total	$	645.7	$	—	$	147.7	$	498.0



As of December 31, 2017 (In millions)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	1,229.4	$	—	$	1,229.4	$	—
Marketable debt securities:
Corporate debt securities	2,609.8		—		2,609.8		—
Government securities	1,919.3		—		1,919.3		—
Mortgage and other asset backed securities	643.4		—		643.4		—
Marketable equity securities	11.8		11.8		—		—
Derivative contracts	2.7		—		2.7		—
Plan assets for deferred compensation	28.5		—		28.5		—
Total	$	6,444.9	$	11.8	$	6,433.1	$	—
Liabilities:
Derivative contracts	$	111.3	$	—	$	111.3	$	—
Contingent consideration obligations	523.6		—		—		523.6
Total	$	634.9	$	—	$	111.3	$	523.6

There have been no material impairments of our assets measured and carried at fair value during the three months ended March 31, 2018. In addition, there were no changes in valuation techniques or inputs utilized or transfers between fair value measurement levels during the three months ended March 31, 2018. The fair values of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third-party pricing services. For a description of our validation procedures related to prices provided by third-party pricing services, please read Note 1, Summary of Significant Accounting Policies: Fair Value Measurements, to our consolidated financial statements included in our 2017 Form 10-K.

Debt Instruments

The fair and carrying values of our debt instruments, which are Level 2 liabilities, are summarized as follows:



	As of March 31, 2018				As of December 31, 2017
(In millions)	Fair Value		Carrying Value		Fair Value		Carrying Value
Notes payable to Fumedica AG	$	3.3	$	3.3	$	3.2	$	3.2
2.900% Senior Notes due September 15, 2020	1,490.7		1,476.0		1,517.7		1,482.4
3.625% Senior Notes due September 15, 2022	1,007.3		994.6		1,032.9		994.3
4.050% Senior Notes due September 15, 2025	1,788.8		1,736.7		1,851.9		1,736.3
5.200% Senior Notes due September 15, 2045	1,898.2		1,722.1		2,077.6		1,722.0
Total	$	6,188.3	$	5,932.7	$	6,483.3	$	5,938.2

The fair value of our notes payable to Fumedica AG was estimated using market observable inputs, including current interest and foreign currency exchange rates. The fair values of each of our series of Senior Notes were determined through market, observable and corroborated sources. For additional information on our debt instruments, please read Note 12, Indebtedness, to our consolidated financial statements included in our 2017 Form 10-K.

Contingent Consideration Obligations

In connection with our acquisitions of Convergence Pharmaceuticals, Stromedix Inc. and Biogen International Neuroscience GmbH in 2015, 2012 and 2010, respectively, we agreed to make additional payments based upon the achievement of certain milestone events. The following table provides a roll forward of the fair values of our contingent consideration obligations, which includes Level 3 measurements:



	For the Three Months Ended March 31,
(In millions)	2018			2017
Fair value, beginning of period	$	523.6		$	467.6
Changes in fair value	(5.6		)	10.0
Payments	(20.0		)	(6.7		)
Fair value, end of period	$	498.0		$	470.9

As of March 31, 2018 and December 31, 2017, $273.7 million and $279.0 million, respectively, of the fair value of our contingent consideration obligations was reflected as a component of other long-term liabilities in our condensed consolidated balance sheets with the remaining balance reflected as a component of accrued expenses and other. Changes in the fair value of our contingent consideration obligations were primarily due to an increase in the probability of achieving certain developmental milestones in the prior year period and an increase in the interest rate used to revalue our contingent consideration liabilities for the current year.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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